Aim for maximum certainty
Published 12:01 am Tuesday, July 12, 2011
Economic uncertainty, Democratic and Republican leaders agree, is keeping businesses and their lenders from making investments that will spur growth and hiring.
It would follow, then, that reaching an agreement to raise the federal debt ceiling — reducing the deficit and avoiding the unfathomable uncertainty that would follow a U.S. default — is imperative.
“Congress must raise the debt ceiling, and it must do so without delay,” U.S. Chamber of Commerce President and CEO Tom Donohue urged at a jobs summit Monday in Washington, D.C., as reported by the congressional newspaper The Hill. “Failure to do so would have grave consequences for Main Street businesses and for every family in this country.”
Indeed, economists attribute much of the growth in the deficit since 2007 to the recession itself — its downward effect on tax revenue and related spending hikes (stimulus and automatic safety-net increases). And corporations are widely acknowledged to be sitting on piles of cash, apparently waiting for a clearer reading of the future before investing in equipment, inventory and additional workers — which would put a much-needed dent in the unemployment rate.
Not only does that argue for reaching agreement and removing potential default from the picture, but also for reaching as big and broad a deal as possible.
Tax increases are not the U.S. Chamber’s first choice for deficit reduction, of course. It favors, as always, starting with spending cuts and reforms to entitlement programs. President Obama has put both on the table, and until last weekend, he and House Speaker John Boehner were reported to be talking about a “grand bargain” to trim $4 trillion from deficits over the next decade — a figure large enough, many believe, to encourage businesses to start investing again.
But Boehner pulled away on Saturday, saying the House Republican caucus wouldn’t bend to the president’s insistence that a net increase in tax revenue had to be part of the deal. Compromise remains elusive, and the clock continues to tick toward an Aug. 2 deadline to avoid the danger of default.
Since that result is unimaginable, one must trust that reason will prevail and a deal will get done.
Responsible leaders on both sides should aim for a package that produces enough economic certainty to loosen the corporate stash of cash. That means serious and meaningful savings in programs Democrats hold dear, and — to make deficit reduction credible — some increase in net tax revenues.
Many in the corporate world may squawk at first, but we suspect they’ll soon realize, and appreciate, what they’ve gained in economic certainty.
